HUMAN CAPITAL REPORTING

Human capital reporting is concerned with providing information on how well the human capital of an organization is managed. There are two aspects: first, external reporting to stakeholders through, in the UK, the compulsory Operating and Financial Review (OFR). The second aspect is internal reporting, which also informs the leadership team and stakeholders generally about how human capital is being managed, but extends this with statements of how the information will be used to guide future action. The purpose is to inform decision-making about human capital management, not just to record the figures.

External Reporting 

The Accounting for People Task Force Report (2003) recommended that operating and financial review reports (OFRs) should be made by companies which have a strategic focus, are balanced and objective and based on sound data’. The Task Force specified that.

The report should clearly represent the Board’s understanding of the links between HCM policies and practices and its business strategy and performance. This means that it should normally include details on the size and composition of the workforce, employee retention and motivation, skills, competencies and training, remuneration and fair employment practice, and leadership and succession planning. The report should follow a process that is susceptible to review by auditors, provide information in a form that enables comparison over time, and use commonly accepted terms and definitions.

The CIPD (2003b) has recommended that the OFR should provide information on.

● the profile of the workforce and its diversity. 

● senior executive remuneration.

● the quality of leadership and management strength.

● how well labour costs have been managed over time. 

● evidence of a coherent, robust people strategy that is mapped to the stated business strategy for the next three years.

● evidence that current people management practice (especially regarding acquisition, motivation and retention) are affecting organizational and business performance. 

● current and forecasted returns on people investment in the next three to five years.

● the value of human capital assets and future investments, especially in major corporate decisions such as mergers and acquisitions. 

● comparator listings in financial league tables – such as industry FTSE or analyst ratings.